MCV outlines what they call "the full story" of the collapse of THQ, the game publisher/developer that was just broken up due to bankruptcy. They hear from Jason Rubin, who served as president of the company during efforts to put it back on course, and he is frank in saying the made "massive mistakes," and that: "There are certainly things to be said about challenges in the mid-tier triple-A publishing business, but I don't think that conflating it with THQ's experience is helpful." Here's a bit of his take on what went wrong:

Unfortunately, the mistakes that were made long before I joined, like the incredible losses attached to uDraw, massive wasted capital in the unpublished MMO that was cancelled, sticking with children's and casual titles far after mobile and tablets had killed the business, bad, late, or otherwise inferior titles like Homefront, and a generally haphazard and inefficient approach to deal making, left the company with too much negative hanging on its books.

Beamer wrote on Feb 1, 2013, 14:09:But video games aren't particularly high upside. They're something very difficult to predict performance and they're costly. Most VCs aren't playing with the kind of money that multiple AAA game development would require.

Plus, the typical endgame for a VC is selling a company or taking it public.

What would a VC do? Would they finance a game? I don't see them liking that, as that's a loan not VC. They'd prefer to buy a studio. Again, as others said, new boss same as the first. VCs typically sell to PE firms, who wipe out old management and put in their own.

Typically. Although such investment in a smaller studio could be taken in the form of equity, at which point, after a success, they could sell the studio to an interested party (as they now have a track record). Additionally, you could sell revenue streams and IP just as easily as you could a company (although video games, unlike movies, have a much, much shorter tail - making it a proposition where you'd be looking to shop the IP, and possibly throw in a couple of the studio's creative directors to help manage it).

There are VC firms that do specialize in high-risk lending, but the terms are usually about as onerous as the above stated "you surrender control of the company and we'll help you get this out there".

But video games aren't particularly high upside. They're something very difficult to predict performance and they're costly. Most VCs aren't playing with the kind of money that multiple AAA game development would require.

Plus, the typical endgame for a VC is selling a company or taking it public.

What would a VC do? Would they finance a game? I don't see them liking that, as that's a loan not VC. They'd prefer to buy a studio. Again, as others said, new boss same as the first. VCs typically sell to PE firms, who wipe out old management and put in their own.

Beamer wrote on Feb 1, 2013, 13:52:Why would a venture capitalist give money to a video game company when it can go to a safer investment?

Typically those are the sorts of investments VC will go after, although the best ones also correlate downside risk with upside risk. If there's a good chance they could lose everything backing a game... they want the potential there to make them ludicrously wealthy. High alpha means high expected returns to capital in the VC world.

Your point about risk distribution is also a good one, and it's something where the large publishers truly excel. Not only do they have multiple baskets to put their eggs in, they're all different types of baskets - you have some core titles in various genres, you have a few licensed titles, you have some toes dipped in the digital distribution waters, you have some mobile games, some long-tail plays, some budget titles, maybe some F2P titles, some merchandising of your properties, perhaps a couple of funded indies in the hopes of finding the next big thing (in the best cases, ones that could just about fund your next AAA tentpole title)... it's all a game of hedges. If one goes down, another (hopefully) goes up.

killer_roach wrote on Feb 1, 2013, 12:46:In short, meet the new boss, same as the old boss.

Exactly.

And anyone saying that the capital would be there has never sought capital. Why would a venture capitalist give money to a video game company when it can go to a safer investment? How much money could a studio get if it hadn't done a big release in the past? The "past sales" thing is nice in all, but that money tends to come all at once. If you're a company like Epic, incidentally one of the few studios mostly self-financing AAA games (long history my butt, it's basically Valve and Epic doing this, now), you get paid every release. So Gears of War 25 comes out. It sells $500 million in its first 3 months. Even if you assume that they go entirely Steam Epic gets, at best, 70%. So Epic now has 350 million dollars. Nice payday, but they now have literally no income for the next 2.5 years, until the next title comes out. And if that title flops that's it, they're done. Zero income, but enormous expenses to make something new.

Which, of course, is why the big independents out there happen to be companies that have diversified. CryTek? Licensing. Epic? Licensing. Valve? Steam. Bungie? Will be ruined if whateverthehellthey'redoingnext doesn't sell.

While we can completely argue that publishers today are screwing their model up, they have a distinct purpose: risk distribution. A developer usually runs by the skin of its teeth because its income is so spiked and unpredictable. But this isn't true for publishers. They have so many releases that their income is staggered and much more predictable. They have so much capital that they can absorb losses without too much of a flinch (so long as they also have hits.) They SHOULD be using this to, you know, take risks. They should be fostering talent. They should be rolling with punches, balancing hits and losses. Maybe they aren't now. But their value is 100% a safe source of capital rather than betting the entire company with each and every release.

I think that said "expertise" is highly, HIGHLY exaggerated. Sure, they get the boxes into the stores, but in most cases that's a matter of getting it to an actual distributor who takes care of the logistics. (Which, funny enough, is what publishers USED to be: distributors. They'd make the discs/CDs, print the manuals, put them in boxes and get them into the stores. And that was it.)

The marketing, some of them are pretty good at it, and others are obviously just flailing away blindly at an easel, and if the end-result happens to have a color match with the actual game, it's considered a succesful marketing campaign. In any case, it's nothing that an actual marketing firm couldn't do just as well, for quite a lot less money.

So what do publishers still do, besides put up the money that was given to them by other people? And why do they need 300 people to do it? (And THQ was a small publisher. Look at something like Ubisoft. The credits for AC3 ran for 25 minutes. About 22 of those were all the weasels who work for the publishing side of it.)

Had developers remained independent, and simply given their game to marketing firms and distributors, would they really have been any less than they are today? I'm going to say no. So the end value of a publisher is basically zero.

Now, it's true that a venture capitalist would have eventually just morphed into a publisher again, but who knows, maybe they would have at least stopped trying to pretend they know better how to develop a game than, you know, the guys who have been doing so for the last twenty years. Which is probably the biggest fucking publisher scourge: Their incessant need to meddle in shit.

Creston wrote on Feb 1, 2013, 11:31:Publishers add nothing to the gaming industry.

Creston

Except for, you know, the capital required to make a game like GTA, Saints Row, etc.

Had there been no publishers, that capital would still be there. Either it would have come from previous sales (like it does now), or from venture capitalists investing in the gaming industry (like it does now). Or do you think that RICIETOEOETELELLOo coughs it up out of his own pocket or something?

The article mentions that THQ's publishing part was THREE-HUNDRED people. That's 300 salaries and benefits etc that every single game published by THQ has to cover. Imagine if that hadn't been there. The reason EA never makes any money (other than the fact that it's fudging the books) is because there's about 1800 parasites hanging like remoraz off every game they make.

Creston

Basically, publishers are venture capitalists with sector-specific marketing and logistics expertise. In the event of the failure of an EA or an Activision, I think that leaves enough of a void for one of the previously-mentioned mid-size players to try to step up, or for an actual venture capital firm to acquire the industry-specific talent to run some stuff from their end.

Creston wrote on Feb 1, 2013, 11:31:Publishers add nothing to the gaming industry.

Creston

Except for, you know, the capital required to make a game like GTA, Saints Row, etc.

Had there been no publishers, that capital would still be there. Either it would have come from previous sales (like it does now), or from venture capitalists investing in the gaming industry (like it does now). Or do you think that RICIETOEOETELELLOo coughs it up out of his own pocket or something?

The article mentions that THQ's publishing part was THREE-HUNDRED people. That's 300 salaries and benefits etc that every single game published by THQ had to cover. Imagine if that hadn't been there.

Creston wrote on Feb 1, 2013, 11:31:Publishers add nothing to the gaming industry.

Creston

Except for, you know, the capital required to make a game like GTA, Saints Row, etc.

Depends. These days, many formerly independent dev houses are now second party/subsidiary developers for publishers(such as the aforementioned Volition and DMA[now Rockstar North]). While they benefit from the capital, there is a long history of successful independent developers that self-financed or otherwise funded through publishing deals and such while still retaining their independence(Valve under Sierra is an obvious example).

There's a pretty big jump between that and publishers adding nothing to the industry.

Creston wrote on Feb 1, 2013, 11:31:Publishers add nothing to the gaming industry.

Creston

Except for, you know, the capital required to make a game like GTA, Saints Row, etc.

Depends. These days, many formerly independent dev houses are now second party/subsidiary developers for publishers(such as the aforementioned Volition and DMA[now Rockstar North]). While they benefit from the capital, there is a long history of successful independent developers that self-financed or otherwise funded through publishing deals and such while still retaining their independence(Valve under Sierra is an obvious example).

jdreyer wrote on Feb 1, 2013, 01:56:I didn't see too much hate here on Blues. Mostly dismay and worry about what would happen to beloved IPs.

It was mostly just that one asshole.

THQ got a lot of disdain before it became obvious it was swirling the drain. I think a lot of people cheered its bad news prior to realizing that the bad news was about to cost jobs, and people shifted from looking at the bad (most of their releases) to the good (some of their teams.)

But the disdain was never "they're trying to screw us" and more "they make such terrible games." Rubin is right - they spent far too long making crappy licensed products for portable systems. Those were cheap, poorly made, and parents very quickly stopped buying them for kids in favor of buying $0.99 mobile games.

Love is not the opposite of hate though. In essence, love and hate are just different expressions of caring. That means people "hate" on EA because they care about games from EA often out of nostalgia no doubt.

Someone not caring about EA, would neither love nor hate it. Indeed, one the greatest misconceptions of human communications is to see hate where there is only indifference and love where is only caring.....

So to fully confuse ya, The opposite of love and hate is indifference. Whether you love or hate something, always means you care about it.

And to top it off, this is why I don't hate or love EA, to me it is completely irrelevant what EA does as long as there are good games to play and I can get good deals on them (which means never buying anything on Origin).

killer_roach wrote on Jan 31, 2013, 22:03:I think EA hate is largely irrational (since I have no love lost for any of the major publishers), but the fact remains that there's a lot of mismanaged firms in the industry that continue soldiering on.

I disagree. There's a LOT of stuff EA has done in the past, and continues to do, that makes them one of the worst. I think a lot of the EA hate is based on personal experience with them.

Activision and Ubisoft say hi. The fact that everybody goes after EA seems to excuse these companies' egregious behavior.

No, pretty sure its not usually excused here. There's plenty of stories on blues about crap they pull. And plenty of comments calling them out for it.

Homefront didn't appeal to me simply because I found the premise to be completely absurd. I can suspend disbelief, but when you ask me to imagine North Korea invading the U.S. mainland, Red Dawn style, I can do nothing but snicker.

Homefront wasn't bad or inferior. Maybe a little late, but otherwise a pretty good game. Problem is that every publisher wants home runs, not good games. If it ain't selling like Call of Duty, might as well not make it I guess

Basically Homefront was a "me too" entry in the genre - and you can't really go up against the CoDs and Halos of the world without something that comes off as being truly unique. (If anything, I almost wonder if it would've been a better product if they fleshed out the single-player a bit more, even if it meant axing the multi.)

Homefront wasn't bad or inferior. Maybe a little late, but otherwise a pretty good game. Problem is that every publisher wants home runs, not good games. If it ain't selling like Call of Duty, might as well not make it I guess